Open AccessBook
Bureaucracy and representative government
William A. Niskanen
- 01 Jan 1971
5.7K
TL;DR: Niskanen as mentioned in this paper developed a formal theory of supply by bureaus and developed a simple theory of the market for public services financed through a representative government; the final section suggests a set of changes to improve the performance of our bureaucratic and political institutions, based both on theory and professional experience.
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Abstract: This is the first book to develop a formal theory of supply by bureaus. Niskanen develops an original and comprehensive theory of the behavior of bureaus with the institutions of representative government. He challenges the traditional view that monopoly bureaus are the best way to organize the public sector, and he suggests ways to use competitive bureaus and private firms to perform operations such as delivering mail, fighting wars, or running schools more efficiently than the present government agencies. The theory concludes that most bureaus are too large, grow too fast, use too much capital, and exploit their sponsor. His theory explains the relation of the output and budget of a bureau to demand and cost decisions. It compares bureaus with other forms of organization facing like conditions and delineates the production and investment behavior of a bureau, the behavior of nonprofit firms with no sponsor, the behavior of mixed bureaus with financing from a sponsor and from the sale of services, the effects of competition between a bureau and a competitive industry. The book also develops a simple theory of the market for public services financed through a representative government; the final section suggests a set of changes to improve the performance of our bureaucratic and political institutions, based both on theory and Niskanen's professional experience. It is essential reading for professionals and students in the social sciences and could prove instrumental in reforming some of our government institutions.
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Equilibrium Verification and Reporting Policies in a Model of Tax Compliance
Abstract: Noncompliance with tax laws and other forms of criminal activity have typically been treated as equivalent; both have been modeled in decision theoretic terms, with the same probability of detection applying to all agents. However, noncompliance with tax laws is different from other criminal activities because taxpayers are required to submit a preliminary accounting of their behavior, while potential criminals obviously are not. This preliminary round of information transmission differentiates individuals, and raises the possibility that it may not be optimal to apply the same probability of detection to all taxpayers. We develop a game-theoretic model of income tax compliance in which the taxpayer possesses private information about his own income, while the IRS knows only the probability distribution according to which the taxpayer's income is realized. By investing effort, the IRS can (stochastically) verify a taxpayer's income. We characterize the sequential equilibrium for this game, which consists of a reporting rule for the individual taxpayer, and a verification policy for the IRS. Our equilibrium has the feature that taxpayers with greater true income under-report less than those with lower true income, and efforts at verification are lower the greater is reported income. If individuals can be classified on the basis of some observable characteristic which is related to opportunities for income, we find that classes of taxpayers who enjoy greater opportunities for high income under-report to a greater extent; accordingly, more effort is devoted to their investigation. This is to be distinguished from the former result, which applies to different types of taxpayers within
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Corruption and rent-seeking
TL;DR: This article showed that the traditional rent-seeking theory misunderstands three factors: first, the impact of a corrupt monopoly on the rent's size; second, corruption as a motivation for supplying preferential treatment; and third, corruption involves a narrow range of interests than those of competitive lobbying.
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